The stock market is pretty jittery in 2022. Between central banks raising interest rates, Russia invading Ukraine, and the U.S. launching a chip war against China, there’s been much to worry about. But through it all, one investor has been buying heavily:
Warren Buffett.
This year, Warren Buffett has been buying up energy stocks, building a position in Occidental Petroleum that is among the largest in his portfolio. Some think that Buffett will eventually buy the entire company! It remains to be seen whether that will happen, but Berkshire Hathaway’s buying makes one thing certain: Buffett isn’t afraid of the market pullback. In this article, I will explore three pieces of Warren Buffett wisdom that investors could benefit from today.
“Be greedy when others are fearful”
“Be greedy when others are fearful” is a Warren Buffett quote that basically means to buy when others are panic selling. When people become afraid, they tend to sell things. “Panic selling” behaviour can be observed not only in stocks, but in many other asset classes as well. Not all selling is panic selling, though. Sometimes stocks go down for good reasons. This is why Buffett says, “Be greedy when others are fearful,” not “buy when others are selling”: it’s irrational sellers you want to buy from, not sellers in general.
“Take the long-term view”
Another classic piece of Warren Buffett advice is to take the long-term view. Studies show that 97% of day traders lose money, but 100% of S&P 500 index investors have made money if they held for 30+ years. Now, individual stocks are more complicated than index funds: sometimes if you pick badly, an individual stock can go down long term. But with a diversified portfolio, taking the long-term view pays.
This can be demonstrated by Warren Buffett’s Suncor Energy Inc (TSX:SU)(NYSE:SU) trade. Warren Buffett started buying Suncor Energy stock in 2018 when it was above $40. The stock went up a little bit after Buffett bought, but it collapsed as low as $20 in 2020. It was a pretty steep decline. But did Buffett panic sell? Heck, no! He actually bought more Suncor Energy stock at the lows! As a result, he was able to exit SU at only a small loss on the total position in 2021.
“Always be reading”
A final piece of Warren Buffett advice for investors to keep in mind is to always be reading. Investing is often thought of as a “smart person’s” game, a field where the biggest brain wins out over time. Buffett actually thinks that natural intelligence is overrated in investing, but he’s a big believer in the power of knowledge. Buffett reads pretty much all day every day. He attributes his success to this habit. Many of the biggest influences on Buffett’s investing style have been authors: Ben Graham, Phil Fisher, John Maynard Keynes, and others. It stands to reason that if you read a lot, you’ll pick things up over time, and become a better decision-maker – assuming you’re reading practical books. So, always be reading. It’s a Warren Buffett approved success principle, for investing as well as life.
